Bitcoin and Ethereum Prices Fluctuate as US Inflation Rate Drops to 2.5% in August
The value of Bitcoin experienced a slight decline on Wednesday following the release of a key inflation indicator showing that U.S. consumer prices had risen less than anticipated over the 12 months ending in August.
According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) increased by 2.5% on a yearly basis, falling slightly below economists’ expectations of a 2.6% rise in the index tracking price fluctuations across various goods and services.
In August, inflation ticked up by 0.2% on a monthly basis, aligning with the previous month’s increase, after a 0.1% dip in June that marked the first negative CPI reading since 2020.
Following the release of the report, Bitcoin’s price dipped to $56,500, reflecting a 1.5% drop in the past day. Concurrently, other cryptocurrencies like Ethereum and Solana also saw declines, with Ethereum at $2,300 and Solana at $130.
Market experts, such as Tom Dunleavy from MV Global, suggested that the recent inflation data could lead to a probable 25-basis-point rate cut in the upcoming week, with the impact on Bitcoin’s price expected to be relatively subdued in the short term.
Looking ahead, the U.S. Federal Reserve is gearing up for its policy meeting next week, with expectations of initiating a series of rate cuts as inflation trends towards the desired 2% target. Traders are speculating on the pace and magnitude of the rate cuts, with a growing likelihood of a 0.25% cut as indicated by the CME Group’s FedWatch Tool.
Moreover, the Fed’s previous interest rate hikes to combat inflation have given way to a renewed focus on the labor market’s health, which has also influenced Bitcoin’s price movements. A recent soft U.S. jobs report resulted in Bitcoin’s price dropping to $53,300, underscoring the interconnectedness between economic indicators and cryptocurrency valuations.
As the Fed navigates the delicate balance between economic growth and inflation, the timing and magnitude of rate cuts will play a pivotal role in shaping market sentiments and asset valuations, including those of Bitcoin. Analysts caution that while lower borrowing rates are generally positive for risk assets like Bitcoin, they could trigger short-term market volatility akin to a “sell the news event.”
In conclusion, the evolving economic landscape, coupled with the Fed’s monetary policy decisions, will continue to steer the trajectory of Bitcoin and other cryptocurrencies in the coming months.
